Free Trial: TheSiteFactory.com

use tax on apartment rentals in State of MI?

Technical topics regarding tax preparation.
#1
juro  
Posts:
456
Joined:
18-Oct-2015 9:11am
Location:
USA
My client has residential apartment buildings that are rented to people here in state of MI.
Is use tax owed to State of MI?

Lodging - Use tax is due on rooms or lodging furnished by hotelkeepers, motel operators, and other persons furnishing accommodations that are available to the public on the basis of a commercial and business enterprise. No tax is due if the room is rented for a continuous period of more than one month to the same tenant

https://www.michigan.gov/taxes/0,4676,7-238-43519_43529-155460--,00.html


2. If the lodger rents for a continuous period of more than one month, use tax is not required.
This applies to the tenants, as they stay for several months.
 

#2
Posts:
2488
Joined:
4-Mar-2018 9:03pm
Location:
6 ft away
Looks like you've answered your own question?
 

#3
juro  
Posts:
456
Joined:
18-Oct-2015 9:11am
Location:
USA
what about preparing the annual return? do i report total revenue? there seems to be no line on the return for exempt sales.
https://www.michigan.gov/documents/taxes/5081_674424_7.pdf
 

#4
Posts:
2488
Joined:
4-Mar-2018 9:03pm
Location:
6 ft away
I am not familiar with MI's sales and use tax....so take this with a grain of salt.

If "No tax is due if the room is rented for a continuous period of more than one month to the same tenant", and all revenue stems from rentals of that type, then why not put "0" on line 2, column B and run that down to get "0" tax due? Assuming this thing has to be filed regularly regardless of activity.
 

#5
juro  
Posts:
456
Joined:
18-Oct-2015 9:11am
Location:
USA
Seems i should be reporting the actual revenues somewhere, but then subtracting them out under the Deductions section.
Line #5, a. seems like a good place to report the deduction.
 

#6
Posts:
1276
Joined:
21-May-2018 7:50am
Location:
SC
Haven't worked with Michigan's sales and use tax returns, but I know in SC there are various exempt options. You enter total revenue, and then choose an exemption reason and enter the exempted amount.

But, if no sales/use tax is ever due, do they even need a retail/accommodations license that triggers reporting requirements? Or do they collect sales and use tax from other sources?
 

#7
Posts:
2488
Joined:
4-Mar-2018 9:03pm
Location:
6 ft away
juro wrote:Seems i should be reporting the actual revenues somewhere, but then subtracting them out under the Deductions section.
Line #5, a. seems like a good place to report the deduction.


Good luck...
 

#8
juro  
Posts:
456
Joined:
18-Oct-2015 9:11am
Location:
USA
i really don't know what to do. this will be the first time ever for this client ever filing this return, and they have had these properties for a few years now. Will the State of MI forgive the penalties?
 

#9
Posts:
2488
Joined:
4-Mar-2018 9:03pm
Location:
6 ft away
If you have a filing obligation, and that's a big if, I think the answer is going to be:

(1) what I alluded to in post #4, or

(2) report gross rent revenue on line 2, column B and back out the exempt portion on line 5k, column B. But this seems to create a Form 3372 maintenance requirement per the instructions.

If I was in your shoes, I would call the appropriate MI agency and ask. This is probably a common question. They'll be able to help.

I agree with Cornerstone. If all this client's revenue will be exempt from sales and use, why did they register for a sales and use account?
 

#10
Posts:
176
Joined:
22-Sep-2014 9:25am
Location:
Farmington, Michigan
Why is this client filing 5081 for residential rentals?
 

#11
juro  
Posts:
456
Joined:
18-Oct-2015 9:11am
Location:
USA
good news, looks like i am exempt. I will be responding to the notices of assessment for use tax with this explanation. also i am asking for the best way to report exempt rental revenues on the form 5081.

rental revenue is exempt for rentals over 30 days:
205.93a(1)(b)
Rooms or lodging furnished by hotelkeepers, motel operators, and other persons furnishing accommodations that are available to the public on the basis of a commercial and business enterprise, irrespective of whether or not membership is required for use of the accommodations, except rooms and lodging rented for a continuous period of more than 1 month.
http://www.legislature.mi.gov/(S(ycmmdzpd5ykejqhxac4lpkoq))/mileg.aspx?page=GetObject&objectname=mcl-205-93a

response on how to report as received from the State of MI:
Unless you also do short term rentals (30 days or less), you should not have to file a return. Not sure why this business is registered. May be for withholding tax? If you have no reason to stay registered for use tax on rentals, you can discontinue the registration retroactively. If you have an account in MTO (Michigan Treasury Online), you can go and discontinue the use tax registration. If you do not have an account in MTO, find Michigan Form 163, complete, sign and mail, and your registration will be adjusted in about seven to ten business days. Hope this is helpful.
 

#12
Posts:
176
Joined:
22-Sep-2014 9:25am
Location:
Farmington, Michigan
juro wrote: also i am asking for the best way to report exempt rental revenues on the form 5081.

Are you asking us this question or is this something you asked the state to which you received the posted response?

Three months ago I asked you why you were even filing the form and you didn't answer. You don't file 5081 for apartment rentals. If for some unknown reason you're going to file 5081 for the rentals and report rental income on it, it probably doesn't matter where on line 5 you subtract it out since it shouldn't be reported on the form to begin with. But if you're going to ignore that, subtract it on on 5k or 5e as it can kind of be finagled into those categories.
 

#13
juro  
Posts:
456
Joined:
18-Oct-2015 9:11am
Location:
USA
sorry, today i learned a lot. Seems strange a return is not required for a business, even if it is an apartment.
 


Return to Taxation



Who is online

Users browsing this forum: Google [Bot] and 88 guests